International Business Environment Midterm

Thursday, October 15th

Management

The process of completing activities with and through other people

International Management

The process of applying management concepts and techniques in a multinational environment and adapting management practices to different economic, political, and cultural contexts

MNC - Multinational Corporation

A firm that has operations in more than one country, international sales, and a mix of nationalities among managers and owners.

Globalization

The process of social, economic, cultural, and technological integration among countries around the world.

The close integration of countries and peoples of the world.

Offshoring

The process by which companies undertake some activities at offshore locations instead of in their countries of origin

Outsourcing

The subcontracting or contracting out of activities to external organizations that had previously been performed within the firm and is wholly different phenomenon

WTO - World Trade Organization

Global organization of countries that oversees rules and regulations for international trade and investment, including agriculture, intellectual property, services, competition, and subsidies

Market Economy

Exists when private enterprise reserves the right to own property and monitor the production and distribution of goods and services while the state simply supports competition and efficient practices

Command Economy

Comparable to a monopoly in the sense that the organization (government) has explicit control over the price and supply of a good or service

Mixed Economy

A combination of a market and a command economy

CQ Drive

Your level of interest, persistence, and confidence during multicultural interactions

CQ Knowledge

Your understanding about how cultures are similar and different

CQ Strategy

Your awareness and ability to plan for multicultural interactions

CQ Action

Your ability to adapt when relating and working in multicultural contexts

Culture

Everything that people have, think, and do as members of society.

Shared mental programs that control individuals’ response to their environment.

Culture - Comprehensive Definition

Culture consists of systems of values, attitudes, beliefs, and behavioral meanings that are shared by members of a social group (society) and that are learned from previous generations.

Why care about culture

It forms values, creates attitudes, and influences behavior.

It shapes and is shaped by the political, legal, and economic environment within which firms must operate.

Cultural Factors

Political, economic, legal, and cultural factors interact and influence each other, they are not independent.

Individualism

Adhere to the philosophy that people should be free to pursue economic and political endeavors without constraint. Government interest should not solely influence individual behavior.

Collectivism

Views the needs and goals of society at large as more important than individual desires. Fascism is an authoritarian political ideology that considers individual and other societal interests inferior to the needs of the state and seeks to forge a type of national unity.

Socialism

A society in which there is government ownership of institutions but profit is not the ultimate goal. Communism is an extreme form of socialism.

Democracy

The system in which the government is controlled by the citizens either directly or through elections, every citizen should be involved in decision-making processes.

Totalitarianism

A political system in which there is only one representative party, which exhibits control over every facet of political and human life.

Islamic Law

Law derived from interpretation of the Qur’an and the teachings of the Prophet Muhammad. It is found in most Islamic countries in the Middle East and Central Asia.

Socialist Law

Law comes from the Marxist socialist system and continues to influence regulations in former communist countries. Since socialist law requires most property to be owned by the state or state-owned enterprises. MNCs have traditionally shied away from these countries.

Common Law

Comes from English law, and it is the foundation of the legal system in the US, Canada, England, Australia, New Zealand, and other nations.

Civil or Code Law

Derived from Roman law and is found in the non-Islamic and nonsocialist countries such as France, some countries in Latin America, and even Louisiana in the US.

Principle of Sovereignty

Holds that governments have the right to rule themselves as they see fit

Nationality Principle

Holds that every country has jurisdiction within its legal territory

Territoriality Principle

Holds that every nation has the right of jurisdiction within its legal territory

Protective Principle

Holds that every country has jurisdiction over behavior that adversely affects its national security, even if that conduct occurred outside the country.

Doctrine of Comity

Holds that there must be mutual respect for the laws, institutions, and governments of other countries in the matter of jurisdiction over their own citizens.

Act of State Doctrine

All acts of other governments are considered to be valid by US courts

Ethical Decisions

Refers to making decisions about dilemmas with an ethical dimension. Involves a conflict, generally, between the needs of the part and the whole. What is considered ethical or unethical behavior is shaped by the culture in its embedded. Decisions encouraged by government initiatives and organizational initiatives.

Ethics

Moral principles of right and wrong that guide a group of people and affect individual behavior

Categorical Imperative - Ethical Decision-Making Approaches

Relies on absolute rules and universal laws that must be followed, regardless of the situation.

Duty & universal moral rules.

Legalism - Ethical Decision-Making Approaches

Ethical decisions are based on society’s laws or policies. If it is legal, then it is considered ethical; rules and regulations define acceptable behavior.

Ethical = Legal

Cultural Relativism - Ethical Decision-Making Approaches

Ethical decisions are based on operating cultural norms. A decision is ethical if it aligns with the norms, values, and practices of the local culture.

Ethics follow local norms.

Enlightened Self-Interest - Ethical Decision-Making Approaches

After weighing costs/benefits, ethical decisions are those that result in most favorable outcomes for the decision maker. Decision may seem altruistic but likely align with long-term self-interest.

Doing good helps long-term.

Ultiltarianism - Ethical Decision-Making Approaches

After weighing costs/benefits, ethical decisions are those that result in most favorable outcomes for greatest number of others.

Greatest good for most.

Light-of-Day - Ethical Decision-Making Approaches

After weighing costs/benefits, ethical decisions depend on the consequences if decision becomes public knowledge.

CSR - Corporate Social Responsibility

The actions of a firm to benefit society beyond the requirements of the law and the direct interests of the firm.

Sustainability

Environmental conservation. Development that meets humanity’s needs and without harming future generations.

Corporate Governance

The system by which business corporations are directed and controlled.

Fair Trade

An organized social movement and market-based approach that aims to help producers in developing countries obtain better trading conditions and promote sustainability.

NGOs - Nongovernmental Organizations

Private, not-for-profit organizations that seek to serve society’s interests by focusing on social, political, and economic issues such as poverty, social justice, education, health, and the environment.

Levels of Culture

Easy to Observe: Artifacts, Medium to Observe: Norms & Values, Difficult to Observe: Basic Assumptions

Individualism vs. Collectivism

Individualism: people should be free to pursue economic and political endeavors without constraint

Collectivism: views the needs and goals of society as a whole as more important than individual desires

Low Power Distance vs. High Power Distance

Power Distance: The extent to which less powerful members of institutions and organizations accept that power is distributed unequally.

Low Uncertainty Avoidance vs. High Uncertainty Avoidance

Uncertainty Avoidance: The extent to which people feel threatened by ambiguous situations and have created beliefs and institutions that try to avoid these.

Cooperative vs. Competitive

Cooperative: People prioritize teamwork, group harmony, and shared success over individual triumph.

Competitive: People strive to win against others, where individual success and beating rivals are heavily incentivized.

Short-term Time Orientation vs. Long-term Time Orientation

Short-term: Desire for quick results, immediate gratification, and spending rather than heavy saving.

Long-term: Willingness to delay immediate success or gratification to achieve distant, long-lasting rewards.

Low Context (Direct) vs. High Context (Indirect)

Direct: Meaning is explicitly stated through clear, literal, and transparent words.

Indirect: Meaning is implied and derived from nonverbal cues, tone, body language, and shared history.

Being vs. Doing

Being (Ascription): A culture in which status is attributed based on who or what a person is.

Doing (Achievement): A culture in which people are accorded status based on how well they perform their functions.

Universalism vs. Particularism

Universalism: The belief that ideas and practices can be applied everywhere in the world without modification.

Particularism: The belief that circumstances dictate how ideas and practices should be applied and that something cannot be done the same everywhere.

Non-Expressive (Neutral) vs. Expressive (Affective)

Neutral Culture: A culture in which emotions are held in check.

Emotional Culture: A culture in which emotions are expressed openly and naturally.

Monochronic (Linear Focus) vs. Polychronic (Non-linear Focus)

Linear: Focuses on doing one thing at a time (single-tasking) and following strict, orderly schedules.

Non-Linear: Comfortable with handling multiple tasks simultaneously (multitasking) and shifting focus rapidly.

Diffuse Culture

A culture in which public space and private space are similar in size and individuals guard their public space carefully because entry into public space affords entry into private space as well.

Specific Culture

A culture in which individuals have a large public space they readily share with others and a small private space they guard closely and share with only close friends and associates.

Cultural Values

Basic convictions that people have regarding what is right and wrong, good and bad, and important and unimportant.

Masculinity vs. Femininity

Masculinity: A cultural characteristic in which the dominant values in society are success, money, and things.

Femininity: A cultural characteristic in which the dominant values in society are caring for others and the quality of life.

Frameworks

Represent the average of people’s behavior within a particular culture

Cultural Intelligence

The capability to function and relate effectively in culturally diverse situations.

Ethnocentric Predisposition

A nationalistic philosophy of management in which the strategic decisions are shaped by the culture of parent company's home country.

Geocentric Predisposition

A philosophy of management whereby the company tries to integrate a global systems approach to decision making.

Globalization Imperative

A belief that one worldwide approach to doing business is the key to both efficiency and effectiveness.

Guanxi

In Chinese, “Good Connections”

Parochialism

The tendency to view the world through one’s own eyes and perspectives.

Polycentric Predisposition

A philosophy of management whereby strategic decisions are tailored to suit the cultures of the countries where the MNC operates.

Regiocentric Predisposition

A philosophy of management whereby the firm tries to blend its own interests with those of its subsidiaries on a regional basis.

Simplification

The process of exhibiting the same orientation toward different cultural groups.

Organizational Culture

Shared values and beliefs that enable members to understand their roles in and the norms of the organization

Bicultural Group

A group in which two or more members represent each of two distinct cultures, such as four Mexicans and four Taiwanese who have formed a team to investigate the possibility of investing in a venture.

Eiffel Tower Culture

A culture that is characterized by strong emphasis on hierarchy and orientation to the task.

Family Culture

A culture that is characterized by a strong emphasis on hierarchy and orientation to the person.

Groupthink

Social conformity and pressures on individual members of a group to conform and reach consensus.

Guided Missile Culture

A culture that is characterized by strong emphasis on equality in the workplace and orientation to the task.

Homogeneous Group

A group in which members have similar backgrounds and generally perceive, interpret, and evaluate events in similar ways.

Incubator Culture

A culture that is characterized by strong emphasis on equality and orientation to the person.

Multicultural Group

A group in which there are individuals from three or more different ethnic backgrounds, such as three American, three German, three Uruguayan, and three Chinese managers who are looking into mining operations in South Africa.

Token Group

A group in which all members but one have the same background, such as a group of Japanese retailers and a British attorney.